Exclusive | China offers unique opportunity for portfolio diversification, Bridgewater’s Prince says

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More stimulus is needed as spending is still too low to achieve its growth target, co-CIO Prince says

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Bob Prince, co-chief investment officer of Bridgewater Associates, during a panel discussion at the 2024 Family Business Summit in Hong Kong on November 16, 2024. Photo: Jelly Tse

Mia Castagnone

Published: 10:30am, 18 Nov 2024Updated: 3:54pm, 20 Nov 2024

Corrected [9:55am, 19 Nov, 2024]

[9:55am, 19 Nov, 2024]
Corrects assets under management in the ninth paragraph

Global diversification is one of the most important opportunities for investors today, according to Bob Prince, co-chief investment officer at US hedge fund Bridgewater Associates. China offers a unique opportunity because its assets are less correlated with global markets.

“Geopolitics, protectionism and so forth are actually creating bigger differences in economic conditions across countries, which is not less efficient, it’s more inflationary,” he said in an interview during the 2024 Family Business Summit organised by the Post. “Investors should consider the possibility of a prolonged higher level of inflation, or in other words, a lower level of falling inflation.”

To build a resilient portfolio, investors should diversify across geographies, across industries and sectors, across asset classes, or “a combination of everything” to have a better balance of having assets that do well in rising inflation, Prince said. Instead, most investors’ portfolios are really positioned to benefit from lower inflation, he added.

Donald Trump’s second term in the White House may unleash a “Trump tsunami” of policies that are likely to roil global markets, according to the former US envoy to China Max Baucus. During his election campaign, he promised to deport illegal immigrants and raise tariffs on Chinese exports, among others, which may lead to a trade war sequel.

A supporter of Donald Trump hugs a cardboard cut-out of Trump at a New York Young Republican Club watch party during the 2024 US presidential election, in New York City on November 6, 2024. Photo: Reuters

His likely policies are also stoking concerns among economists and financial advisers that tariffs will almost certainly hit US consumers and cause US inflation to accelerate, economists said. That raises doubts about how fast the Federal Reserve can cut interest rates in 2025.

Most investors’ portfolios are really positioned in stocks and bonds which benefit from lower inflation, said Prince. That underscores the benefits of diversification, given that a single market leaves the investor “stuck with one monetary system, [which] drives risk premiums and discount rates in that system”, Prince added.